What Home Buyers NEED to Know about the $8,000 Tax Credit

What First Time Home Buyers need to know about the $8,000 Tax Credit; plus Using Owner Financing with the Tax Credit!
August 8, 2009
By: Donald Croucher Jr., Realtor'
Robert McNelis Co.


The government is offering first time home buyers an $8,000 tax credit in an effort to stimulate the ailing real estate market. Sellers can draw buyers by highlighting the refund in their ads, especially when used in conjunction with owner financing.

This appealing tax credit is part of the Recovery Act that was extended for 2009 home purchases. Here are 10 things you must know to make the most out of this program.

1. First Time Buyers Only - The $8,000 tax credit is open to first time home buyers only. This means the buyer (and their spouse if married) must not have owned their principal residence at any time during the three years prior to the date of purchase.
2. Primary Home - The buyer must live in the home as their primary residence. The domicile must be located in the U.S. However, it can be a house, houseboat, house trailer, cooperative apartment, condominium, or other type of home.
3. How Much Do You Get - The credit is 10% of the home purchase price to a maximum of $8,000. This means the home price needs to be $80,000 or greater than for the full $8,000 refund. The credit is claimed with the federal tax return using IRS Form 5405.
4. Timing is Everything - The increased $8,000 tax credit applies to homes purchased in 2009 that close before December 1, 2009.
5. Yours to Keep - Rather than a tax deduction the tax credit is fully refundable. This means a qualified buyer could have no taxable earnings and still receive the refund. Unlike the earlier $7,500 version from 2008, this 2009 credit does not have to be repaid period.
6. 'Don't Move' - The buyer must continue to live in the property for 36 months after the purchase date. If they move earlier than the 3 years the credit must be repaid.
7. Limitations Apply -Income limitations also apply based on modified adjusted gross income. The period out range is $75,000 to $95,000 for single buyers and $150,000 to $170,000 for married couples filing a joint return.
8. Use it as Down Payment - There are FHA mortgages that make a portion of the tax credit available at obtain. This is accomplished through a short-term loan that can be applied to closing costs and a portion of the down payment above the 3.5% minimum. There is also the possibility of filing an amended 2008 tax return so buyers don't have to wait for the refund until filing their 2009 return.
9. Creative Financing - If a first time home buyer has difficulties qualifying for a bank loan they might consider purchasing a property with owner financing. Also known as an installment sale, the seller agrees to 'be the bank' and accept payments from the buyer. This permits a buyer to take benefit of the 2009 tax credit even when banks say no to a mortgage loan.
10. The Fine Print - Like any act of Congress there are a few pesky details. For instance the property can't be acquired from a related person. Be sure to review the fine print available online through the Internal Revenue Service web site. It is also advisable to call competent tax and legal counsel to avoid any costly mistakes.

The combination of historically low interest rates, large supply of vacant Homes, reasonable prices, and the $8,000 tax credit are making 2009 an excellent time for buyers to purchase their first home. When sellers also offer to owner finance the property the easy financing and tax credit should entice buyers to get off the fence and consider a home acquisition.

For More Information Contact:
Donald Croucher Jr., Realtor®
Robert McNelis Co.
Phone: 214-242-2412
Email: Info@RobertMcNelis.Net
Web: Www.RobertMcNelis.Net